Graf, out of touch because of a three-week break due to a foot injury, came back from 1-3 down in the final set to win 2-6, 6-3, 6-4 against Yugoslavia's Sandra Nacuk.
The former world No 1, who dominated the women's game for a decade, kept spectators on the edge of their seats in a see-saw match in which she had trouble keeping the ball in play. After she struggled back to win in just over an hour and a half - her 888th win against 112 losses - she had tears in her eyes when her achievement was celebrated.
Graf said she was taken completely by surprise on the court by the bouquet and standing ovation from her home crowd as she was unaware of the milestone she had reached in her 17-year career. "I had no clue it was my 1,000th match," said the 29-year-old. "Obviously I'm proud of those numbers, but if it meant more to me I would know these things."
Belgium's Dominque van Roost, seeded 11th, and France's Amelie Mauresmo also advanced at the event, in which 16 of the world's top 20 have entered. Van Roost beat Germany's Jana Kandarr, 5-2, 6-1 and Mauresmo beat Switzerland's Emanuelle Gagliardi, 6-4, 6-3.
Graf's win did not come easily as Nacuk, ranked 102nd, flew into a 4- 1 lead in just 16 minutes as Graf struggled with her serve and her forehands.
However, after a downpour caused an hour delay, Graf regrouped and won the second set easily. "I think the rain came at the right point. I had half an hour to sit down and think about what I was doing," Graf said.
Graf's erratic play returned in the third set, however, and she fell behind again. Graf then seemed to respond to the crowd's support as she fought back to secure the win.
This tournament has played a major role in Graf's career. She has won the event nine times, more than any other tournament in her career. She first played in the event as a 13-year old in 1983, then two year's later reached the final and pushed the then world No 2, Chris Evert, to two sets before losing. "I have a special relationship with this tournament," Graf said.
John Roberts, page 25